(thank you @ShortSeller76 for this idea)
Since I do not follow this stock and am buying options on it for the first time, I am keeping very small positions. Also the volumes are low and spreads are wide, so this is further reason to use less capital. I am keeping my capital risk low while the reward potential high. According to my brokerage data, this stock is 88% institutional owned so selling could mean heavy selling, the stock is overvalued, and its high earnings surprises over past year may indicate peak growth.
Daily chart:
> Price is up against 200sma, while 10sma is still under 20sma
> RSI jumped from under 30 to test 50 thus far but I expect it to reverse down since RSI went under 33.33.
> Stochastic %K gave a bullish warning in its rise between 26-28 Jan, and usually it reverses down before rising again. I stress - this is an indication, not a prediction.
> Technically, I see good reason to buy puts with stock between 580 and 588.40.
30min chart:
> 588 is a reversal area after a 5-wave move up
> RSI shows the 3 price peaks (rectangle) in this move, and in this case the move up is counter to the daily downtrending ma's
> Stochastic %D is above 80 again and should turn down soon.
Taken altogether, my ideal trade would be to hold this as a longer swing down for the stock to reprice after future earnings. However I could be wrong about this and options are too expensive that far out. This stock may also reprice lower if markets sell off more. Due to theta decay and unpredictable IV-based changes, and to manage risk, I am using two different expiries.
The TRADE:
> BTO 4Feb 550 puts at $3.20
> BTO 18Mar 450 puts at $5.40
> Exit 4Feb puts if stock goes over high of day.
Since I do not follow this stock and am buying options on it for the first time, I am keeping very small positions. Also the volumes are low and spreads are wide, so this is further reason to use less capital. I am keeping my capital risk low while the reward potential high. According to my brokerage data, this stock is 88% institutional owned so selling could mean heavy selling, the stock is overvalued, and its high earnings surprises over past year may indicate peak growth.
Daily chart:
> Price is up against 200sma, while 10sma is still under 20sma
> RSI jumped from under 30 to test 50 thus far but I expect it to reverse down since RSI went under 33.33.
> Stochastic %K gave a bullish warning in its rise between 26-28 Jan, and usually it reverses down before rising again. I stress - this is an indication, not a prediction.
> Technically, I see good reason to buy puts with stock between 580 and 588.40.
30min chart:
> 588 is a reversal area after a 5-wave move up
> RSI shows the 3 price peaks (rectangle) in this move, and in this case the move up is counter to the daily downtrending ma's
> Stochastic %D is above 80 again and should turn down soon.
Taken altogether, my ideal trade would be to hold this as a longer swing down for the stock to reprice after future earnings. However I could be wrong about this and options are too expensive that far out. This stock may also reprice lower if markets sell off more. Due to theta decay and unpredictable IV-based changes, and to manage risk, I am using two different expiries.
The TRADE:
> BTO 4Feb 550 puts at $3.20
> BTO 18Mar 450 puts at $5.40
> Exit 4Feb puts if stock goes over high of day.
Trade closed manually:
sold puts, loss on 4Feb was similar to profit on 18Mar expiry. price did not move well so I did not like this for options.